How to Buy Indian Stocks From the US
Learn how US investors can effectively engage with the Indian stock market. Get practical insights on navigating cross-border investment.
The global investment landscape offers diverse opportunities, and the Indian stock market has captured the attention of many US investors due to its growth potential. Investing internationally allows for portfolio diversification, potentially providing access to new growth drivers beyond domestic markets. This guide clarifies the pathways and considerations for US investors to participate in the Indian market.
Investment Avenues for US Investors
US investors seeking exposure to the Indian stock market primarily use two distinct methods: American Depositary Receipts (ADRs) and India-focused Exchange-Traded Funds (ETFs). Both methods offer a unique approach to accessing Indian equities, traded conveniently on US exchanges, simplifying the investment process by eliminating direct foreign currency transactions.
American Depositary Receipts are certificates issued by US banks that represent shares of foreign companies, including those based in India. These ADRs trade on major US stock exchanges, such as the New York Stock Exchange (NYSE) or Nasdaq, making them accessible through standard brokerage accounts. Each ADR can represent one or multiple shares of the underlying Indian company and is denominated in US dollars. Companies like Infosys, Wipro, and ICICI Bank have listed ADRs, providing a way to invest in specific Indian corporations.
India-focused Exchange-Traded Funds, on the other hand, offer a diversified approach by holding a basket of Indian stocks. These ETFs are also traded on US exchanges, allowing investors to gain broad exposure to the Indian market or specific sectors within it. Investing in an India-focused ETF provides diversification across multiple companies, which can mitigate the risk associated with investing in individual stocks. While ADRs offer direct exposure to the performance of a single Indian company, ETFs provide a more diversified, market-wide or sector-specific investment.
Setting Up Your Investment Infrastructure
Before purchasing Indian stocks through ADRs or India-focused ETFs, establish an investment account with a US-based brokerage firm. This involves gathering personal and financial documentation to comply with regulatory requirements.
Opening an investment account typically requires providing personal identification information. This includes your full legal name, current residential address, and your Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN). Brokerage firms also commonly request a valid government-issued photo identification, such as a driver’s license or passport, and proof of address, like a recent utility bill or bank statement. These documents help the brokerage comply with “Know Your Customer” (KYC) regulations.
Beyond identification, investors will need to provide details about their employment status, occupation, and financial information, including annual income, net worth, and investment objectives. Once the account is approved, investors will need to link a bank account to fund their new brokerage account.
Navigating the Investment Process
Once an investment account is established and funded, investors can execute trades for Indian stocks through ADRs or India-focused ETFs. The practical steps for searching and purchasing these instruments are standardized across most US brokerage platforms.
To begin, investors log into their brokerage account and utilize the platform’s search function. ADRs are typically identified by their unique ticker symbols, similar to domestic stocks, while India-focused ETFs also have their own specific tickers. The platform displays current market data, including bid and ask prices and the last traded price, providing real-time quotes.
When placing a buy order, investors typically choose between a market order or a limit order. A market order instructs the brokerage to execute the trade immediately at the best available price, prioritizing speed. Conversely, a limit order allows investors to specify a maximum price they are willing to pay, and the order will only execute if the market price reaches that specified limit or better. While market orders guarantee execution, limit orders guarantee price control but may not execute if the target price is not met. After placing an order, trade confirmation and settlement usually occur within two business days.
Tax Considerations for Indian Stock Investments
Investing in Indian stocks through US-traded instruments involves specific tax considerations for US individuals. Gains and dividends from these investments are subject to US tax laws.
Capital gains from selling ADRs or India-focused ETF shares are subject to US income tax. The tax treatment depends on the holding period. If an asset is held for one year or less, any profit is a short-term capital gain, taxed at ordinary income tax rates (10% to 37% for 2025). For assets held over one year, profit is a long-term capital gain, benefiting from preferential tax rates (0%, 15%, or 20%) based on taxable income. These capital gains and losses are reported on IRS Form 8949 and summarized on Schedule D, filed with Form 1040.
Dividends received from Indian stock investments through ADRs or India-focused ETFs are also subject to US taxation. These dividends are generally reported on Schedule B. Many dividends from foreign corporations, including those represented by ADRs, can qualify as “qualified dividends.” Qualified dividends are taxed at the same lower rates as long-term capital gains (0%, 15%, or 20%).
India may impose a withholding tax on dividends paid by its companies. To mitigate double taxation, US investors may claim a foreign tax credit. This credit is claimed on IRS Form 1116 and allows taxpayers to offset their US tax liability by the amount of foreign taxes paid. Brokerage firms typically provide Form 1099-DIV, detailing dividend distributions and any foreign taxes withheld.